Uruguay registered 1.2% growth in gross domestic output (GDP) last year, an indication that the South American country has escaped its period of recession.
Consumer confidence is growing, the peso is rising in value, and public spending is increasing, according to BBVA Research. More importantly, inflation is decreasing despite a rise in wages in recent months.
The research firm has projected GDP growth for 2018 at 2.6%, saying that investment and infrastructure improvements hold the key to securing growth in the medium term.
A key component of growth in 2016 was the power industry, which had surprisingly good performance.
Uruguay’s performance does not essentially signal that South America could be recovering from the four years of economic slowdown. Unlike Brazil and Chile, Uruguay does not rely heavily on mineral exports to spur growth — beef, wool, and agriculture products make up the larger chunk of its exports.
Its beef exports have grown multi-fold since it joined Mercosur, a sub-regional trade bloc that includes Argentina, Brazil, Paraguay, and Venezuela. These days, forestry is also contributing greatly to the economy.
Moreover, Uruguay stands out in Latin America for being an egalitarian society and for its high per capita income and low level of poverty. In relative terms, its middle class is the largest in America, and represents 60% of its population, according to the World Bank.
That said, analysts don’t see Uruguay’s success as a signal that neighboring countries could also be on the way to economic recovery, particularly Argentina and Brazil.
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